Retail tenancy leases in Australia

Inquiry report

This inquiry report was released on 27 August 2008.

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Government response

Key points
Contents

The market for retail tenancies is dynamic and complex. It is an amalgam of large and small businesses participating as landlords and tenants.
- There are around 290 000 retail tenancy leases in Australia with up to 58 000 written each year.
- About one fifth of leases are in shopping centres with the remainder in retail shopping strips and other retail formats.
Retail tenancy leases - legally binding documents that define the relationship between the landlord and tenant - are governed by State and Territory retail tenancy legislation.
The main intention of specific retail tenancy legislation is to address bargaining imbalances between large shopping centre landlords and small retailers.
- The legislation is highly prescriptive and has grown in volume - now amounting to some 700 pages across jurisdictions.
- Significant and widening differences between jurisdictions persist, despite attempts at harmonisation.
- Aspects of the legislation have constrained the market, lowered productivity and added to compliance and administrative costs.
Nevertheless, a number of innovations appear to have been useful, in particular:
- simple, low cost and accessible dispute resolution
- disclosure statements
- lease information
- the encouragement of registration of leases in some jurisdictions.
In an environment where the market is working reasonably well overall, further attempts to prescribe lease terms and conditions would not improve outcomes.
The Commission considers the most fruitful approach to improving the operation of the retail tenancy market and reducing costs would be to:
- further improve transparency, disclosure and dispute resolution, to reduce information imbalances and unwind constraints on efficient decision making
- reduce the prescriptiveness of legislation and move to a nationally consistent retail lease framework, to increase efficiency and reduce costs
- adopt a more focused approach to the shopping centre segment of the market, through the introduction of a national shopping centre code of conduct, to ease tensions and reduce costs in that segment and to support the move to less prescriptive legislation and national consistency.
In addition, the potential to relax planning and zoning controls that limit competition and restrict retail space and its utilisation warrants further examination.

Chapter Preliminaries
- Cover, Copyright, Ministerial letter, Terms of reference, Contents, Abbreviations and explanations
Overview
Chapter 1 Introduction
- 1.1 Background and recent regulatory developments
- 1.2 Recognising constraints on economic efficiency in retail tenancy
- 1.3 Relation to other inquiries
- 1.4 Study procedures
- 1.5 Structure of the report
Chapter 2 Market for retail tenancy leases
- 2.1 Scope of the market
- 2.2 Provision and use of retail space
- 2.3 Market entry, exit and vacancies
- 2.4 Summing up
Chapter 3 The regulatory environment governing retail tenancies
- 3.1 Origins of retail tenancy legislation and regulation
- 3.2 The nature of legislative and other responses
- 3.3 Zoning and planning
- 3.4 Summing up
Chapter 4 Dispute resolution
- 4.1 Development of dispute resolution procedures
- 4.2 Current dispute resolution procedures
- 4.3 Summing up
Chapter 5 Principles for regulation of the retail tenancy market
- 5.1 Views on effectiveness of retail tenancy regulation
- 5.2 Designing good regulation
- 5.3 Considerations for intervening in retail tenancies
- 5.4 Proposed principles
- 5.5 Summing up
Chapter 6 Security of tenure
- 6.1 Participants' views
- 6.2 Evidence on lack of security
- 6.3 Assessing the case for change
- 6.4 Summing up
Chapter 7 Occupancy costs
- 7.1 Participants' views
- 7.2 Evidence on occupancy costs
- 7.3 Assessing the case for change
- 7.4 Summing up
Chapter 8 Market information, transparency and disclosure
- 8.1 Participants' views
- 8.2 Evidence on information failure
- 8.3 Assessing the case for change
- 8.4 Summing up
Chapter 9 Business conduct and dispute resolution
- 9.1 Participants' views
- 9.2 Evidence on the incidence and nature of disputes
- 9.3 Concerns about business conduct
- 9.4 Assessing the case for change
- 9.5 Summing up
Chapter 10 Assessment and alternative approaches to regulation
- 10.1 Views on aspects of regulation that hamper market operation
- 10.2 Main features of an alternative approach
- 10.3 Summing up
Chapter 11 The Commission's recommendations
- 11.1 The scope for regulatory improvement
- 11.2 Actions to improve the operation of the retail tenancy market
- 11.3 Implementation, adjustment issues and impacts
Appendix A - Consultation
References
Extension of the reporting date letter

Retail tenancy leases in Australia

Inquiry report

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